N E W Y O R K, Sept. 10 — The good news for Americans is that an economic recovery may happen sooner than they think. The bad news: It doesn't look like it will be a dramatic turnaround.At least that's the forecast from a survey of 31 prominent economists polled by the National Association of Business Economists, or NABE, in its latest quarterly study.
Harvey Rosenblum, the NABE president-elect, said that "two-thirds of the panelists expect an economic recovery to begin before year-end," but added that the group "continues to revise down its forecast for economic growth in 2002 and the remainder of the year."
The NABE is also forecasting greater woes among some businesses than consumers: the panel sees more struggles ahead for the high-tech industry, but an increase in consumer spending
While a general economic turnaround would be a welcome development for businesses, workers and consumers, the NABE is actually lowering its projected growth rate for this year and next, meaning the effects of the economic turnaround could be very limited.
The panelists lowered their projected growth of U.S. gross domestic product for 2001 as a whole to 1.6 percent, down from 2.0 percent. And for 2002, the panel reduced its growth projection to 2.7 percent, down from 3.1 percent.
But, as Rosenblum noted, "The panel's forecast sees no recession — more specifically, no quarter with negative GDP growth over the forecast horizon."
Many economic observers use a rule of thumb defining a recession as two consecutive quarters of negative growth. Last month the Commerce Department said second-quarter growth in the U.S. was 0.2 percent.
And the panelists give credit to the Federal Reserve for stemming the economic bleeding. The Fed has cut rates seven times this year, by a cumulative three points, in a bid to stimulate business investment and consumer spending. Seventy-four percent of survey participants said the Fed's rate cuts had been "just right," and expected it to be the biggest factor in spurring a recovery.
Business Spending Down, Consumer Spending Up
The NABE survey also shows the extent to which the economic slowdown has affected businesses. The survey projects a two percent contraction in business investment in 2001, followed by a one percent increase in 2002.
With profits down, company after company has stopped investing in new information technology, having already spent unprecedented amounts on new products in the late 1990s. For this reason, the NABE said its economists saw a "sharp concentration of economic weakness in the high-tech sector."
In contrast to the woes of companies, the economists surveyed expect consumer spending, which accounts for about two-thirds of economic demand, to grow by three percent in 2001, slightly more than anticipated in the previous survey. A major chunk of this spending will be concentrated in the home-building business, which continues to do well.
The survey comes as the economy has hit its lowest point in several years. On Friday, the Labor Department announced that the unemployment rate has reached 4.9 percent, the highest since September 1997.
The stock market has also plunged recently. The Dow Jones Industrial Average is down eight percent in the last two weeks, while the Standard & Poors 500 is at its lowest point since 1998.
The Fed is set to hold its next meeting in October, and will consider another rate cut at that time.
ABCNEWS.com's Peter Dizikes contributed to this report.
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